With New Smartphones, High Hopes for Nokia and Microsoft Union

LONDON — Nokia, the Finnish cellphone maker, introduced two smartphones on Wednesday, the first fruits of its alliance with Microsoft, in a bid to curb its declining market share.

Nokia’s chief executive, Stephen A. Elop, presented the Lumia 800, a 420 euro ($584) touch-screen device, and the Lumia 710, a 270 euro handset at a company product introduction. Both devices are being sold in six European countries and will be sold later this year in parts of Asia. Other smartphones are planned for the United States, but not until early next year.

Analysts said the Nokia smartphones, the result of an eight-month collaboration with Microsoft, could also help Microsoft extend its dominant computer software business into the cellphone and mobile device market. The software has received positive reviews, but few handset makers are using it.

The new lineup aims to revive Nokia’s tarnished reputation as an innovative force in mobile phones, an industry it pioneered and dominated until Apple and Google, helped by more user-friendly software, wrested control of the smartphone business four years ago.

“Nokia really needed this to happen today, and this is a new start for the company,” said Pete Cunningham, an analyst based in London with the research firm Canalys. “This helps stop the bleeding and will help Nokia get back in the game.”

Mr. Elop, a former senior Microsoft executive who made the decision to enter the software alliance with his former employer in February, said the new Lumia devices showed that Nokia, which is based in Espoo, Finland, was delivering on his promise of a turnaround. “This signals our intent to be today’s leader in smartphone design and craftsmanship,” Mr. Elop told 3,000 people attending the company’s Nokia World conference in London.

During an interview, Mr. Elop said Nokia was planning to push its smartphones into the United States, where it has struggled, early next year. He said Nokia was in advanced talks with the four major American operators, which together sell more than 90 percent of all cellphones in the country. Nokia’s new smartphones for the United States, Mr. Elop said, will run on high-speed 4G networks that use a technology called LTE, or Long Term Evolution, as well as on older 3G networks.

They will also be made to run on networks that use the C.D.M.A. standard, which is used by the market leader, Verizon Wireless.

Mr. Elop said that Nokia was listening closely to phone operators and would be flexible in meeting their demands. “If you do the math, you may come to the conclusion that clearly we are in good conversations with those operators,” he said

Photo

A Nokia employee demonstrated the Lumia 800 in London on Wednesday.Credit
Sang Tan/Associated Press

Microsoft, based in Redmond, Wash., is using its business connections — its server software powers a lot of cloud computing centers used by network operators — to help Nokia re-establish relationships with American operators, he said. “When we enter a market, it is not just dipping your toe in the market, but coming in with the appropriate levels of investment by us,” Mr. Elop said. “It takes work. It takes money. We are being very deliberate.”

With Lumia, Nokia aims to beat Apple and Google by designing handsets that are easier to use than the two best-selling smartphones, the Apple iPhone 4S and the Samsung Galaxy S II, which runs Google’s Android software. The Lumia 800’s start screen is a wheel of interactive tiles. By clicking a tile, users are taken directly to a preferred task, like text messaging a friend, tracking a sports team or listening to a favorite song, without having to enter and close applications.

The software interface, developed by Microsoft but refined by Nokia, is designed to remove as much laborious touch-screen tapping as possible. Marko Ahtisaari, Nokia’s head designer, said the smartphones used fluid, rather than linear, design logic, which eliminated many of the intermediary steps required with the array of static app icons that Apple and Google’s Android favor.

Shares of Nokia closed at 4.80 euros, down 0.6 percent, in European trading.

One investor said that Nokia and Microsoft must still overcome skepticism about the venture. “I have seen no evidence that Nokia and Microsoft are making a game of it — yet,” said Jeffrey P. Davis, the chief investment officer at Lee Munder Capital, an investment fund manager based in Boston with $5.4 billion under management. “Android is winning the mind space on the consumer front. The business world will probably follow.”

Neil Mawston, an analyst at Strategy Analytics, estimated that Nokia was paying $15 to Microsoft for each Windows smartphone it produced, less than the estimated $20 other handset makers must pay. The new Windows phone lineup, he said, has the potential to help restore Nokia’s fortunes in the smartphone market.

“One thing I have learned in this business is to never say never,” Mr. Mawston said.

A version of this article appears in print on October 27, 2011, on page B2 of the New York edition with the headline: With New Smartphones, High Hopes for Nokia and Microsoft Union. Order Reprints|Today's Paper|Subscribe